Preparing for the worst...#covidtimes

We dont expect the worst..thats human nature. We hope ..and hope for the best. However as covid 19 has shown us, things can become difficult and we need to be prepared financially for tough times to come.

As we see across the world, companies are under distress, millions of people are out of jobs and millions of people are facing salary cuts. When will this become better? We can only hope. 

There are a few things that we should do immediately to ensure a safe future for ourselves and our near and dear ones. There should be no delay for any of these actions.  Here they are..

1. Get a personal medical insurance 

Most people are used to believe that they dont need any insurance because they are covered by their companies. The big point here is that they have to be employed by the company for this coverage to be available.  

If you are in a company which is going to have significant issues in its industry or even if not,. It is just prudent to get health insurance asap for at least the next few years.  Getting a new job may not be that easy ... and health can be impacted anytime. 

If you are a student who is just graduating.. check if you are still eligible for health insurance under your parents... if not.. get one!

2. Build quickly your emergency fund

One needs at least some money in case of challenges. If it requires you to make use of the moratarium ( only if it is a must), evaluate that option also.. but not in any case for credit card bills ( that interest rate is too high!). Else with the lockdown one has understood what is really required in terms of expenses. 

If you are investing via sips in equity .. move that to the emergency fund ( liquid or arbitrage) until you have it completed.  Dont worry.. the market will remain volatile for some time.

3. Insure your life

Get a life insurance.  This should be at least 10× of your salary. This is again something that one cannot depend on the company policies. That may also not be sufficient. 

4. Make a will 

This is the toughest of them all... thinking about death and planning for it. But it needs to be done.  Ensure you have it written down and you have shared your investment details with your spouse. 

4 things. Thats it .. not more.  

Hope will save us. But lets be prepared for difficult times. Hopefully it will not happen

Lets prepare.. its simplefinancialsense 

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Asset allocation ... # covidtimes

"We will remember these times when things become alright again."

A quote said by many. A feeling felt by most. A hope of things becoming alright again by all.

Trepidation is still in our hearts as we move from lockdown to partial opening up of the Indian economy. The economic impact of the lockdown is going to be immense.

Today we got a call from our maid who didnt have enough money to buy ration or gas for her home.  She had not done any work in April and neither her husband. Someone who had sent her children to decent school.. even to ask for money would have been a big blow to their ego... of no longer improving their personal status.  It was simple enough to do a quick transfer to her account. No questions asked. IMPS ensured she called back immediately to confirm money received. 

I was reading a blog of someone who has been a successful retiree in the FIRE program. Retired in his 30s with over 3 Mn usd in savings. Plans all in place. This market crash has impacted his net worth by over 600k usd. With additional expenses coming because of a second child on its way.. he now needs to rethink the point of being retired. Hey i would have thought even 2.4mn was huge !

The point i am making is that things are quite unpredictable and this covid impact will need us to rethink our financial plans and statuses.  

Think of the students who were to get into the job marketplace in march and june.  What is their future? Tough. And they may have educational loans to pay off. .

With all of these changes one needs to sit down and re evaluate our risk appetites... i know i feel that mine has definately become more conservative that what i used to be a few yrs ago. We need to rethink our asset allocation.

Equities has gone back to where it was 8 yrs ago... we have lost 8 yrs of gain... and to recover it will take us that much more time. ( buffet is sitting on 130Bn USD of cash and he hasnt bought any thing in this downturn).

Gold has had a stellar run... and most dont have much in their portfolio. 

Its best to relook at the folio and rebalance... debt and equity . In equity rebalance small mid and bluechips.

Its time to sharpen our pencils.

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